"I have the best news ever," a business associate
with a son in college said to me recently, as she clapped
her hands with excitement. "We're getting $5,000 back
on our taxes because of my husband's withholding at work,
and it's exactly what we need with all our bills coming due."

I managed a weak smile to acknowledge her good fortune.

I didn't have the heart to tell her it actually was bad news,
because they were receiving their own money back without interest.
Even though it was forced saving, it would have been better
if everything came out even, with no refund.

Once her euphoria eases, I'll suggest that her husband check
with his employer to see how much is being withheld from his
salary and make a W-2 adjustment to withhold less in 2006.
I'll recommend that he verify those changes to be certain
the payroll department made them.

"I always tell clients it's advantageous not to over
withhold and to instead put that money to work sooner, rather
than waiting a year and getting it back as a refund,"
said Dean Knepper, CPA, CERTIFIED FINANCIAL
PLANNER™ professional, and president of Lifetime
Financial Planning Inc. in Herndon, Va.

Consider tax-free investments

Withholding is one example of what you can learn from your
2005 tax return, which should be a foundation for your 2006
financial planning. It is a reality check in dollars and cents
to help avoid repeat mistakes.

"On the first page of your IRS 1040 form, look at interest
income, because if you have a lot of it, and you're in a top
federal tax bracket, you should consider investing in a municipal
bond fund," Knepper said. "That way you'll earn
income tax-free and end up with more income on an after-tax
basis."

If you also see hefty capital gains distributions from mutual
funds you own, consider selling and reinvesting in more tax-efficient
funds, he advised...

Money
Adviser - When it's you vs. your kids

By Greg Daugherty

...Today's retirees face some tougher trade-offs than their
predecessors of just a generation ago.

...Nowhere does the situation become trickier than when you're
forced to decide between a child's financial needs and your
own. ...The last thing most of us want to do is to become
a burden on our offspring in our old age. And our kids probably
wouldn't be too thrilled with the idea either. At the same
time, most of us feel compelled to help, not just because
we love our kids but because our own parents may have assisted
us. "A lot of parents will say, 'My parents paid for
my college or made the down payment on my first home, and
I want to do the same thing,'" says Dean Knepper,
a CPA and CERTIFIED FINANCIAL PLANNER™ professional
in Herndon, Va. "But things are very different today."

So what should you do? And not do? Here are some suggestions:

Skimp on the sheepskin - ...Steer your child toward a
perfectly fine state university, ideally one where you
qualify for cheaper in-state tuition rates. One way to rig
the decision, from financial planner Knepper: Offer to pay
only the kid's room and board and let him or her handle the
tuition. Room and board doesn't vary by much ($5,816 a year
on average for four-year public colleges during the 2004-2005
school year vs. $6,606 for private ones, according to the
College Board), so it won't make a huge difference to your
finances either way. However, the gap in tuition ($4,843 a
year public vs. $17,270 private) may give both you and Junior
a good reason to start humming the State U. marching song.

Don't give that down payment - "If your child
has good credit, there are a lot of no-down-payment loans
out there," Knepper says. In other words, you may not
have to cough up a quarter toward Junior's first home.

Rethink
your equity line of credit

By Ellen Beck

Steadily rising interest rates signal it's time to take another
look at your home equity line of credit.

These loans, which allow you to borrow money based on the
equity in your home, fluctuate with the prime lending rate.
That rate has inched up by 2 percentage points in the past
two years and is likely to climb further. Federal Reserve
Chairman Alan Greenspan said he will continue to allow interest
rates to slowly increase.

...Dean Knepper, CERTIFIED FINANCIAL PLANNER™
professional in Herndon, is advising clients to "be proactive
and look at the long term." ...Knepper said, while you
initially may have a higher payment with a fixed rate loan,
in the current rising market you will likely "end up
paying a lot more with these floating loans."

HSAs—a
healthy alternative to high medical care costs

New health savings accounts offer a different way to
pay for medical care.

By Ilana Polyak

No doubt you’ve noticed how big a share of the health
insurance burden you’re shouldering these days, regardless
of whether you’re paying for your own premiums or are
covered under an employer plan. Across the US, health care
insurance has been climbing at a double-digit clip for the
past few years, causing companies and individuals alike to
come up with creative ways to foot the rising bills.

One new way to save some health cash is by opening a health
savings account (HSA).

If you’re healthy and you make enough money to want
to shelter some of it from taxes, this could be an attractive
alternative. At the very least, if you’re paying for
your own health insurance HSAs will give you far more choices
and greater control over your health dollars.

...Financial planners say the best use of an HSA is to make
it a savings vehicle. This is because of the tax advantages—it’s
a more efficient way to save, since you won’t be dipping
into your gains to pay Uncle Sam. “The power of the
tax-deferral is great,” says Dean Knepper,
a CPA and CERTIFIED FINANCIAL PLANNER™ professional
in Herndon VA.

...Since money is deposited tax-free and accumulates tax-free,
an HSA may also be used as a retirement account. It can be
used for medical expenses in retirement without paying taxes.

“Unfortunately, the investment options right now have
high fees,” says Knepper. HSA customers shouldn’t
automatically use the investment options offered by the insurance
company that underwrites the insurance policy, Knepper warns.
Such choices tend to be staid money market funds or pricey annuities.
Shop around for third parties offering better and cheaper choices
for the investment portion, he says.

Online
calculators play Social Security numbers game

By Joe Rominiecki

For the average American in search of truth about Social
Security, further confusion is just a few mouse clicks away.

Claiming to show the exact potential of President Bush’s
proposed personal investment plan, a bevy of Social Security
calculator tools can be found on the Internet, but they vary
greatly in size, complexity and – unfortunately –
results.

The Center for Economic and Policy Research unveiled the
Accurate Benefits Calculator on Tuesday, which is sometimes
offline for final edits. It asks users for age, marital status
and salary, among other factors, and compares their monthly
retirement benefits under the current and proposed systems.

Given multiple scenarios, it consistently shows Bush’s
plan will result in reduced benefits.

In contrast, the Cato Institute, a think tank devoted to
Social Security reform, has a calculator that shows the exact
opposite.

CEPR’s calculator says a 25-year-old single man making
$35,000, about the U.S. average, would get $13,956 per year
upon retirement, but Cato’s says he would get $28,970.

For a 35-year-old married woman making $50,000, the predicted
yearly benefits are $17,376 and $29,598. For a 45-year-old
married man making $80,000, CEPR’s calculator says $21,492
per year; Cato’s says $34,187.

These contradictions are rooted in differing variables –
investment return rates, for instance – that the calculators
use and keep behind the scenes for the sake of simplicity.

...The CEPR calculator uses an investment return rate of
4.35 percent, while Cato assumes 6.5 percent per year. Dean
Knepper, a CPA and CERTIFIED FINANCIAL PLANNER™
professional, said these factors can be confusing. “In
general, most of them are being too optimistic. By using calculators,
you’re going to get a false impression if (stocks) are
safe enough,” he said.

...Perhaps most worrisome about the multitude of independent
Social Security calculators is the one thing they all have
in common. Given the same information, they all provide estimates
for benefits under the current system that are significantly
higher than the calculator provided by the Social Security
Administration itself. Knepper said that planning for retirement
is too complicated to pack into an online gizmo. “If
you really want to get a good idea, you need to sit down with
a professional,” he said.

Four
Moves You Can Make Now to Reduce Future Pain

By Carla Fried

IF your definition of tax planning goes no further than blocking
out the weekend before April 15 to slog through your tax returns
- or to make a last-minute plea to an accountant - you are
probably missing out on some money-saving moves.

Even the most creative tax specialist is limited in what
he or she can do for your 2004 taxes, but you can do plenty
now to make your 2005 tax bill - and next year's tax season
- much less painful.

...TAKE STOCK IN LOSERS AND WINNERS Dean Knepper,
a CPA and CERTIFIED FINANCIAL PLANNER™ professional,
says strategic tax selling should be a regular part of your
investment approach. "Rather than wait until year-end
to see if you might have a loss, look for losses throughout
the year," said Mr. Knepper, whose advisory firm, Lifetime
Financial Planning, is based in Herndon, Va. "Even
if you still like the stock, you can book the loss and buy
it back in 31 days, but in the meantime you reduced your tax
bill." If you owned the security for less than one year,
the loss will be deemed short-term and must first be applied
to offset any short-term gains.

...Mr. Knepper says that newly self-employed people can fall
an often-overlooked tax trap if they neglect to pay Social
Security and Medicare taxes when making quarterly estimated
income tax payments. In 2005, the 12.4 percent self-employment
tax for Social Security is levied on the first $90,000 of
income. The 2.9 percent Medicare tax is collected on all income.
"That's a nasty surprise we run across a lot," Mr.
Knepper said.

Whether you're planning your retirement or already living
it, a time-honored tool called a spending log can help you
get a firmer grip on your finances. Carry a small notebook
and jot down every expense during the course of your day,
no matter how small. Try to keep it up for a month, then look
it over.

"People always find things they can cut back on,"
says Dean Knepper, a CPA and CERTIFIED FINANCIAL
PLANNER™ professional in Herndon, VA. "They end
up taking a lot less money out of their ATM each week."

What to do with the extra cash? Knepper suggests that pre-retirees
"increase your 401(k) contributions so you at least get
the full company match. Then, if you're eligible, fund a Roth
IRA." Do that and you won't have to worry as much about
your retirement spending when the day finally comes.

Number
Cruncher

By Arthur Goldgaber

At face value, monthly and quarterly investment account statements
provide a snapshot of the account’s performance. But
between the lines, there’s a whole world of data waiting
to be unearthed.

...For Dean Knepper, CPA, CFP®,
the expenses charged by the funds in 401(k)s, IRAs and annuities
is the No. 1 figure that investors should monitor. Knepper,
a fee-only financial planner and president of Herndon, Va.
based Lifetime Financial Planning, Inc. uses
this example to show how a 0.5 percent difference in an annual
fee can have a significant impact on a retirement savings
account:

If a 50-year-old investor places $100,000 in a tax-deferred
account that earns a before-expense return of 8 percent and
carries an annual expense ratio of 1 percent, it will grow
to $386,968 over 20 years. If the same person invests in a
comparable fund with an annual expense ratio of just 0.5 percent,
the investment will grow to $424,785 over the same 20 years
— that’s almost a 10-percent difference.

To monitor his client’s expenses, Knepper uses professional
portfolio software from Morningstar. ...These tools allow
Knepper to prepare a report for the entire portfolio that
consolidates all of a clients’ investments and provides
additional data like expense ratios and information about
the investment’s tax efficiency (if it’s a taxable
account).

He also uses these reports to analyze portfolio performance
versus a benchmark such a total stock market index. The typical
401(k) investor looks at his quarterly statement and assumes
that if the total value of the holdings has gone up, the performance
is adequate. Yet, the return may be trailing the overall market
by a significant amount.

How
to Pay for College - Three Smart Strategies

If your children are under 10, a college savings plan
based on your current household income is a good place to
start.

Financial assistance is probably not in the picture - though
you should run the numbers anyway - so do the bulk of your
investing in tax-free accounts. Stash your first $2,000 in
a Coverdell, where you can choose any low-cost fund, and the
rest in a 529 savings plan. To choose one, look first at the
fund company's performance and ethical reputation - avoid
those involved in the fund scandals - then at expenses. Don't
get carried away by state tax breaks. You may have to pay
back your tax benefit if you roll over your account to another
state. And unless you receive a hefty deduction, you're likely
to come out ahead by simply choosing the best, low-cost plan,
especially if you're investing a large lump sum.

Consider this example from Dean Knepper,
a financial adviser and CPA in Leesburg, Va. The expense ratio
for a Vanguard balanced fund in Virginia's VEST 529 plan is
0.93% a year - $465 annually for a $50,000 investment. Residents
can deduct $2,000 in contributions a year form their state
income tax, saving $88.25 [in net taxes for someone] in the
25% [federal] bracket [assuming they itemize on the federal
return]; that brings the Virginia plan's cost down to $378.75.
By contrast, the same fund in Utah's 529 plan costs 0.35%
a year - just $175 on that same $50,000. That's a better deal
for Virginians, even without a tax break.

The
ABCs of IRAs

By Roderick Boyd

...The Congressional Research Service recently estimated
the average retirement savings of households headed by 55
to 64 year olds to be $55,000. Convert this into an annuity,
and the retiree gets only $408 per month, taking the gold
out of "the golden years."

...But before you cut back to two meals a day and disconnect
the cable, there are several cures for the retirement blues,
found in individual retirement accounts. IRAs, as they are
universally known, offer the ability to invest money with
a degree of shelter from taxes. Precisely how much shelter
is a function of the specific IRA, as well as your family's
income.

The most popular IRA is the Roth IRA, named after the late
Senator William Roth, who championed its passage into law.
A CERTIFIED FINANCIAL PLANNER™ professional with Lifetime
Financial Planning in Herndon, Va., Dean
Knepper, said that Roth IRAs offer the opportunity
for a couple to invest up to $6,000 ($3,000 each) in separate
accounts tax-free. And, if the couple is age 50 or older,
they can each invest up to $3,500 a year. Even better, starting
in 2005, they will be able to add an additional $1,000 each,
making it an $8,000 annual nest egg [$9,000 if age 50 or older].

Mr. Knepper said the Roth IRA allows our fictitious couple
to grow assets without having yearly tax bill worries. If
they wish, they can start taking withdrawals at age 59 1 /2.
If they don’t want to touch it for whatever reason,
they don’t have to, as there is no mandatory withdrawal
age.

Of course, Mr. Knepper said some clients don’t concern
themselves with those attributes, focusing on the fact that
income withdrawn from the Roth IRA is tax-free. Tax-free,
as in, no taxes to be paid. So Roth IRA income will not send
an otherwise low tax-bracket couple careening into the Donald
Trump bracket. In short, it is like finding a lot of money
in your pants pocket every year.

Accountants and other practitioners have embraced financial
planning. There is a wide range of advice available from people
with a wide range of backgrounds. No matter what your training
and experience may be, there is one thing that all advisors
must do: systematically learn the client’s goals. If
done correctly, then the advisor will help the client better
understand his or her own values and priorities. If this is
not done thoughtfully, then the ultimate service provided
will be suboptimal.

Talk, More Talk, and Questions

...“Usually by the time clients come to us, they know
what their goals are. Our job is first to determine how important
a particular goal is. We ask them to rank their goals in order
of importance. Then second, we need to determine whether a
particular goal of the client is realistic given the client’s
financial situation and deadline for accomplishing the goal,”
says Dean Knepper, CPA, CFP®,
managing member of Lifetime Financial Planning,
a fee-only planning firm in Herndon, Va.

Knepper indicates that it is then incumbent on the planner
to determine if the client is willing to change his or her
current lifestyle and spending habits to reach a particular
goal, as well as to adjust his or her tolerance for risk.
This is to gauge whether the investment allocation required
to reach the goal in a given time frame is something the client
is likely to stick with. Finally, the planner, according to
Knepper, needs to resolve any conflicts that exist among the
goals. This may necessitate a discussion concerning compromise
on the various goals.

Juggling Act

...“If the conflict is between two goals such as retiring
early or paying for college, then we have to determine which
one is most important and to what degree,” concurs Knepper.
This may involve evaluating options such as deciding whether
to retire at age 60 and pay very little towards college costs,
or to work to 65 and pay a larger portion, or to work until
age 70 in order to be able to pay for most of it.

Spending After Retirement

...“Normally clients say they want to retire by a particular
age. We found that most people in retirement will spend as
much then as they did before, they just may spend it in different
ways,” says Knepper. Instead of commuting costs, maybe
that money will be spent on travel or entertainment. “We
assume the same level of spending. Then if they want to retire
at a given age, we explore how willing are they to reduce
spending now to contribute more, and how much are they willing
to reduce their lifestyle long-term to do that,” says
Knepper.

...Many investment professionals are very comfortable with
the outlook for stocks, bonds and mutual funds in the coming
year. But if the economy dips unexpectedly, all bets are off,
and stocks and bonds could be hurt.

That means the conventional wisdom of not putting too much
of your savings into any one type of investment holds especially
true in 2004. "Investors should stay diversified and
have a stock/bond allocation that they will stick with each
year," says Dean Knepper, head of Lifetime
Financial Planning LLC in Leesburg, Va.

The last couple of years, when stocks fell sharply in price,
a lot of people went overboard by selling completely out of
stocks, and they missed the recent rebound. That's why a balance
of stocks, bonds and other investments works best.

...dividend-paying stocks are a recent choice to add to the
mix [due to more favorable tax rates under tax legislation
passed in 2003]. ..."I would caution people not to dump
their bonds for dividend-paying stocks if they can't stomach
the risk," Knepper says. "There's less volatility
involved in bonds."

But the change in the tax laws for dividends [and capital
gains] underscores a philosophy he recommends for investors
with money in both tax-deferred and taxable accounts. Knepper
says investors should keep their stock holdings [as much as
possible] in taxable accounts because of the tax benefits.

...[Paying down credit card debt] Knepper notes that the mortgage-refinancing
boom of 2003 led to a lot of people paying off their credit-card
debt using equity taken out of their home, which can be a smart
move provided they don't start piling on more credit-card debt.
"My concern is they never get their spending under control,"
Knepper says.

FAMILY
FINANCE: Saving for College

How families can plan for their children’s higher
education.

By Kevin Self, Editor

Sending children to college can be one of the most financially
challenging times for a family. Parents want the best for
their children, but the cost of living—let alone higher
education—is not getting cheaper. For a child born today,
a four-year, Virginia state college education is estimated
to cost over $40,000 per year. Loudoun Family Magazine spoke
with Dean Knepper, a local financial expert
and the founding principal of Lifetime Financial Planning,
based in Leesburg. Knepper, a CERTIFIED PUBLIC ACCOUNTANT
and CERTIFIED FINANCIAL PLANNER™ professional, answers
questions concerning the best ways for families to save money
for college and gives practical advice on how to get started
now on your children’s college fund.

Buying prepaid tuition plans to Maryland’s universities
just got as much as 28 percent pricier for parents and others
planning ahead.

The 21 percent to 28 percent increases to pay now for tomorrow’s
college costs come as the state-sponsored College Savings
Plans of Maryland have struggled to adjust to skyrocketing
tuition rates and a growing program deficit in the past year.

But savings experts don’t expect the higher enrollment
prices to curb enthusiasm for the program, which offers state
and federal tax deductions. Instead, they say the high costs
have only made parents and other caretakers more interested
in the plans.

Parents are concerned about how they’re going to be
able to pay for all of it, said Dean Knepper,
a CERTIFIED FINANCIAL PLANNER™ professional at Lifetime
Financial Planning LLC in Leesburg, Va.

Finds
DCA Strategy Lacking

Letter to the Editor
- Published in the September 2003 Issue of Journal of Accountancy

I’m surprised that the article “Investing After
50” [June 2003 Issue of Journal of Accountancy] included
dollar-cost averaging (DCA) among the recommendations for
CPAs who advise clients age 50 and over. Academic research
over the past 20 years has shown that a DCA strategy does
not result in superior returns even after adjusting for risk.
The following is an excerpt from Dr.
Moshe Milevsky’s book Wealth
Logic: Wisdom for Improving Your Personal Finances:

“DCA is an inferior strategy. Alternate strategies
result in greater expected wealth for the same level of risk
or identical wealth for lower risk.

“Replacing one major investment decision with many
smaller ones does not make the final outcome any safer. Therefore,
if you have the money now and you have the choice, it is best
to pick an asset allocation that you are comfortable with—and
live with it. If you don’t have the money now, invest
it as soon as it is available without using an averaging strategy.

“If you use DCA as a savings strategy, then you are
essentially investing when you have the money, and forcing
yourself to save, which is a good thing. The conscious decision
to split your investments over time is the problem.

“Saving money on a regular basis is a wonderful idea,
unfortunately investing it isn’t.”

As tuitions escalate, parents are finding themselves more
and more stretched to pay for their children's college educations.
Luckily, there are a number of terrific savings vehicles to
help. (It should go without saying, of course, that the earlier
you begin to stash your cash, the easier the task will be.)
U.S. News consulted financial experts to get the skinny on
the plan best suited for your situation:

...COVERDELL EDUCATION SAVINGS ACCOUNT

Parents can contribute up to $2,000 a year to a Coverdell
ESA. Earnings grow free of federal income tax and can be used
to pay for qualified education-related expenses--including
items like computers--from kindergarten through college.

Who benefits: "A couple whose child is likely to go
to college and who is expected to be ineligible for financial
aid," says Dean Knepper of Lifetime Financial
Planning a fee only financial planner in Leesburg,
Virginia. Contributions can be made by married taxpayers with
adjusted gross incomes as high as $220,000 and by single taxpayers
with incomes as high as $110,000. Parents also retain [some]
control over the assets [until the child is 30 years old].
For example, the parents can change the beneficiary to another
family member if they wish.

...ROTH IRA

First introduced in 1998, Roth IRAs have been a favorite
of savers, thanks to the tax-free growth of earnings. Like
traditional IRAs, contributions are currently limited to $3,000
per year ($3,500 if you're age 50 or older). However, there
is no mandatory withdrawal age.

Who benefits: Parents who establish individual Roth IRAs
for themselves will benefit the most since the money is held
in their personal account. If the money is not needed for
college expenses or the child skips college, a parent can
use the money for retirement. "So Roths are most beneficial
to someone who would not otherwise contribute to a Roth except
to save for college," says Knepper. "For anyone
saving for retirement, I would recommend using the Roth for
that purpose and use a 529 plan, which has the same tax-free
advantage, to save for college."

Three
Families, Three Smart Ways to Save for College

It's never too early - or too late - to begin saving
for your child's education. Financial experts show three families,
at three different stages of life, how to make the most of
their assets.

By Walecia Konrad

...The family: Mike, 37 a financial executive,
Jean, 39, a stay-at-home mom, Mickey, 10, Kathleen, 6, and
Maggie, 2. They live in New Jersey. The financial
picture: Household income: between $120,000 and $130,000
a year, depending on Mike's bonus. ...Retirement savings:
Mike contributes 7% to 8% of his salary to his company's 401(k).
Looking ahead: ...Once the youngest child
is in school full-time, Jean may return to work part-time.

What they've done so far: Until two years
ago , the sum total of their college fund was about $1,000.
...Home renovations, family visits and presents ...and the
general expenses of raising kids had easily consumed the bulk
of Mike's paychecks until he landed his current position.
"It seemed like we never had any extra money," says
Jean. The birth of their youngest child was the wake-up call.
"Suddenly Mike and I knew we had to get serious if we
were ever going to put three kids through college," she
says.

The couple has saved $10,000 from Mike's bonuses and tax
refunds over the past couple of years in an account earmarked
for college investing. Mike and Jean would like to put that
money into a 529 savings plan, but the rocky market over the
past two years has stopped them form taking the plunge.

What the experts suggest: First things first.
"Mike should contribute the maximum allowed to his 401(k)
account, which is $12,000 this year," says Dean
Knepper, a Leesburg, Virginia - based CERTIFIED PUBLIC
ACCOUNTANT and fee-only CERTIFIED FINANCIAL PLANNER™
professionalspecializing in college planning.
"You should always contribute the most to your retirement
fund first because you can borrow for college tuition later.
If your retirement funds do well, you can help your children
down the road." What's more, retirement accounts are
not considered part of the parents' assets when they apply
for financial aid, so maxing out a 401(k) account serves as
a shelter of sorts. In addition, ... both Mike and Jean should
also consider opening a Roth IRA account and each contributing
the $3,000 maximum.

...Mike and Jean need to take the investing plunge now. They
should consider putting their $10,000 college stash in a 529
account for their children, suggests Knepper. New
Jersey's plan does not offer a tax break for residents, so
Mike and Jean may want to choose another state's plan with
lower fees and more options. ...As a result, Mike and Jean
may want to look closely at the plan offered by Utah. It has
low fees and a range of index funds that can work well for
college savings, says Knepper. Balancing stock index funds
with bond index funds will reduce risk and help build a portfolio
that works well for all three of their children, despite their
range in age.

How they can save more: With Mike's increased
income, the couple should continue stashing his bonus money
in their college accounts, says Knepper. In addition, they
may want to return to the budget they lived on when Mike was
making less and see if they can save the difference each month.
And if Jean returns to work part-time in a few years, she
can put her earnings into a college account.

The
Houston Chronicle

Loan
Debt the Norm for College Students

By Mark Helm - Hearst News Service

With tuition on the rise, students increasingly finance their
dream of a college education through loans, leaving millions
of graduates burdened with debt.

In 2002, the average student graduating from a four-year
university had amassed $ 18,900 in debt, a 66 percent increase
from five years earlier when that amount was $ 11,400, according
to a survey by Nellie Mae, a leading student-loan company.

Along with rising debt levels, the number of students taking
out loans also has increased sharply, from 46 percent of graduating
seniors in 1992 to 70 percent in 2000, according to the National
Center for Education Statistics.

..."For many kids, their student loan is about the same
size as a car loan," says Dean Knepper,
a CERTIFIED FINANCIAL PLANNER professional in Virginia.
"So after graduation, keep driving your old car for five
years, pay off your student debt and you'll be much better off
for the rest of your life because of that degree."

Pomp,
Circumstance and Tax Shelters

By Susan Garland

Ask teachers what they most value, and they'll likely name
education and family. Starting a college-savings plan is a
good way of addressing both priorities. Retired teachers can
help with their grandchildren's college costs while also leaving
a legacy of learning-and they may also reap some tax benefits
for themselves.

...No matter which plan a grandparent chooses, warns Dean
Knepper, a fee only financial planner at Lifetime
Financial Planning in Leesburg, Virginia. "I
would advise them to have, at most, 60 percent in stocks during
the early years and no more than 20 percent in stocks as the
child nears college."

Leaning
Curves

For financial planners the threeRsof 529 plans are finding the right state,
rewarding investments, and some form of reasonable
compensation.

By Donald Jay Korn

... actions by individual states cause the various programs
[529 plans] to vary widely. For planners to match the right
plan with the right client, knowing and keeping up with many
state plans will be essential.

...Planners' compensation can raise concerns, according to
Hurley [Joe Hurley, founder of Savingforcollege.com].
"When your client's home state offers its own 529 plan
that is direct-sold, or is broker-sold but not available through
your own broker-dealer, you may have a problem," he notes.
"The state may be offering financial incentives to its
residents, such as state income tax deductions for contributions,
that don't come with your out-of-state 529 product."
In such cases, planners might run into conflict-of-interest
charges if they sell a client a commission plan from out-of-state
rather than a no-load home-state plan with tax breaks.

...Of course, not all planners will receive commissions for
helping clients select 529 plans and not all program managers
will offer load products. Brent Hillhouse, a principal at
Vanguard, says that his firm has no interest in selling loaded
529 plans. "Our idea is to sell through RIAs and fee-only
advisers, keeping our plan simple, transparent, and low-cost."

Planners who receive fees rather than commissions must come
up with ways to get compensated for putting clients into 529
plans. Some, like Gary Schatsky of New York, charge annual
retainers, which cover the provision of 529 advice, while
others, such as Dean Knepper, a fee only
financial planner in Virginia, bill on an hourly basis. "We
give clients recommendations and detailed instructions,"
says Knepper. "It's quite simple for them to make the
applications themselves."

...Will investing in a 529 plan reduce eligibility for financial
aid?

..."Federal law doesn't say anything specifically about
529 savings plans and financial aid," says Joe Hurley,
founder of Savingforcollege.com. "The U.S. Department
of Education is telling applicants and school financial-aid
officers to treat 529 plans as parental assets, which is good
news because parental assets are assessed at a much lower
rate than student assets."

...Because 529 plans don't generate current income, any inside
buildup won't affect the aid formulas. What happens, though,
when money is withdrawn to pay college bills?

"Currently, distributions from 529 plans aren't counted
as a student's income, but that may change in the future,"
says Dean Knepper, a fee only financial planner
in Virginia. "If those distributions must be included,
one strategy is to minimize distributions until January of
the student's junior year. After that, no more financial aid
forms need to be filled out, and the income won't be counted."

Education
- On Course for College

With returns down and costs up, following the right strategy
is critical.

By Penelope Wang

FEW INVESTORS have been hit as hard by the market free-fall
as parents saving for college. If you were stashing money
in stocks, you have been set back two or three years - and
you may have only a short time to make up your losses. To
make matters worse, as colleges struggle with shrinking endowments
and reduced government support, they are levying steep tuition
increases.

...It's time to face the truth. Open your account statements
and check the state of your savings, then double-check how
much more you need to put away to meet the total cost of private
or public school; you can use savings calculators on the Web,
such as those found at www.collegeboard.com,
www.finaid.com
or www.money.com.
That's likely to be a big number - even bigger than it was
the last time you looked. But stay calm. You can still keep
college affordable by putting away at least half the cost,
says Dean Knepper, a fee only financial planner
in Virginia, and making up the difference with financial aid
and loans.

To find out how much aid you might receive, you can calculate
your expected family contribution (EFC), the amount colleges
will expect you to pay based on your income and assets; use
an EFC calculator at www.finaid.com
or a worksheet in a college planning handbook. If your children
are young, you can make only a rough guess, but by the time
your oldest is a high school sophomore, you can fine-turn
your estimates.

...Chances are you and your child will have to borrow. Fewer
than half of students from families earning over $100,000
receive any financial aid, and that's mostly in the form of
loans. Fortunately, federal student loans are a great deal
right now. Recent interest rates on Stafford loans were at
all-time lows - 3.46% (for subsidized loans, which are awarded
to needier students) and 4.06% (unsubsidized).

You can also get attractive deals on loans - a good thing,
since borrowing limits on Staffords are too low to cover high-priced
private colleges. Among them: a home-equity loan or line of
credit (rates now average just 7.36% and 4.49%, respectively,
and are deductible to boot) and federal PLUS loans (Parent
Loans for Undergraduate Students), with a recent rate of 4.86%.

A network of fee-only financial planners provides affordable
services for every size pocketbook.

By Lynn Brenner

UNTIL RECENTLY, first-rate financial planning was like
J.P. Morgan’s yacht: If you had to ask what it cost,
you couldn’t afford it.

You can now feel free to inquire, because some fee-only planners
are offering as-needed service at affordable hourly rates.
Their target client: the overworked do-it-yourselfer who is
in need of expert, unbiased advice. Does this sound familiar?

…Sheryl Garrett, a Shawnee, Kansas,
adviser who is an ardent proponent of hourly financial planning
for the middle class, estimates that fewer than 300 firms
nationwide are structured to provide fee-only advice to middle-income
Americans. Many of them are members of the Garrett
Planning Network (GPN) an organization she established
in 2000.

…Her firm is designed for clients who need objective
advice to help them manage their own finances rather than
for those who want to turn everything over to an expert. “I
think most Americans want to consult a financial planner periodically
the way they’d consult a doctor or dentist,” she
says. “The comment I hear most frequently from my clients
is, ‘I just want to know if I’m doing things right.’
”

…Most GPN members are CERTIFIED FINANCIAL PLANNER
professionals, which means they have passed a rigorous two-day
exam, meet a continuing education requirement, and abide by
a written code of ethics. As GPN advisers, they also agree
to work on a fee-only basis, and may not require account minimums
or long-term contracts for the majority of their clients.

…GPN members remain independent professionals, but
in exchange for enrollment fees and annual dues, they receive
practice management tools – time tracking and billing
software, marketing materials and support, and educational
courses – as well as unlimited access to a network of
their colleagues. All of that benefits the GPN clients, too,
of course: They get a counselor whose credentials have been
examined by a knowledgeable third party, whose business is
likely to run efficiently an profitably, and who can brainstorm
with peers on a regular basis.

GPN now numbers 115 members. They are all generalist financial
planners but come from a wide range of backgrounds including
tax accountancy and insurance, as will as investment management.
The GPN Website (www.garrettplanningnetwork.com)
lists the members by region and by 21 areas of expertise,
including employee benefits; stock options; divorce planning;
corporate severance plans; and college, tax and retirement
planning.

[Quotes from GPN Members Interviewed for the Article:]

[J. Jay Hurford, CFP®, CIMC, CLU,
ChFC - on Insurance] …A financial planner who
is acting as your fiduciary has an entirely different perspective
than one who is selling products, says Hurford. Clients often
ask him whether they should buy long-term care insurance,
for example. “Many people feel they’re doing something
wrong if they don’t have this coverage, because of the
way they’re approached by insurance agents,” he
says. Hurford’s immediate response is a question that
you’re unlikely to hear form a salesman: Can you afford
the premiums – not only now, but after you retire? If
not, he says, you shouldn’t buy it. “For many
people, these premiums are a stretch, even while they’re
working. The last thing you want is to retire and be unable
to maintain the policy and have it lapse.”

[Mark Barrish, CFA, CFP®, CMFC, ASA
– on Investing] …GPN advisers say their clients
usually aren’t looking for someone to manage their money.
On the contrary, they want to handle their own finances, says
Barrish.

…Few people for example, actually know how to build
an investment portfolio, Barrish claims: “If the 401(k)
plan offers five funds, for example, they’ll just put
20 percent of their money in each fund.” He designs
a diversified portfolio based on his analysis of the client’s
goals and risk tolerance, and suggests specific products.

[Dean Knepper, CPA, CFP®
- on 401(k) plans] …Undiversified 401(k) accounts are
often the result of inadequate investment menus. Most plans
have very limited choices, says Knepper, a Virginia fee only
financial planner. “It’s a big problem. The typical
401(k) I see is mostly large-cap funds, for example. And on
the bond side, the only choice is usually a long-term bond
fund.” Knepper helps clients compensate for their 401(k)
plans’ limitations. In some cases, he might advise them
to contribute only enough in their 401(k) plan to get a matching
contribution from the employer and to concentrate on saving
for retirement in IRAs and/or in tax-managed or index funds.
As Knepper points out, these are effectively tax-deferred
until they’re sold – and then taxable at low capital
gains tax rates.

[Glenda Moehlenpah, CFP®, CPA
– on Debt Management] …Some of her clients have
no investable assets. “I see lots of people who spend
more than they earn,” she says. “Often, they’re
young couples who have grown up never knowing what it’s
like to do without. They have champagne appetites on a beer
income – and an ‘I deserve it’ mentality.”
Moehlenpah finds it enormously rewarding to teach these clients
how to get out of debt and start saving: “It feels awesomely
good to make huge changes for small clients – better
than making incremental changes for big ones.”

[Rich Chambers, CFP®
- on Investing] …”My most requested service is
to look at current investments and recommend replacements,”
he reports. Like many of these advisers, Chambers finds that
those people who have suffered the worst losses are often
reluctant to diversify out of highly concentrated positions.
They’re so focused on the investments themselves that
they’ve lost sight of the larger picture, he says: “The
healthiest attitude is to focus on where you want to get and
what you need to get there. The investments are just a vehicle.”

[John Pochodylo, CFP®, CRPC®
- on Retirement Planning] …These days, many people walk
into his office with heavily damaged portfolios. “Almost
all of them were 100 percent invested in stocks or stock funds,”
he says. “They thought the market was an actuarial table
– you put money in, you get 15 percent.” In addition
to recommending reallocated portfolios, Pochodylo searches
for ways they can reduce or eliminate debt and also cut their
investment expenses. “When you’re playing catch-up,
it’s even more important to pay attention to what you
pay to the intermediaries, or the croupiers, as I call them,”
he says. “It’s the tyranny of compounding –
paying an extra 1 percent a year on an investment over 20
to 30 years adds up to a lot.”

With the stock market on a long march to nowhere, home owners
are increasingly looking to their homes as a source of quick
cash or a hedge on the retirement life-style they once believed
their technology stocks would provide. Experts say tapping
the equity in your home or selling it now in a white hot market
to capture large gains isn’t the slam dunk decision
it seems at first blush.

...It’s elementary, but people should always keep in
mind that by tapping the equity in their homes, they are at
the same time putting their homes at risk, says Dean
Knepper, a CERTIFIED FINANCIAL PLANNER professional
that runs Lifetime Financial Planning in
Leesburg, Virginia.

“I recommend people pay off a mortgage over a shorter
period of time using money that would otherwise have gone
to the conservative portion of their portfolio,” Kneppersaid. “Especially now there isn’t anywhere
else you can get a guaranteed return of say six percent which
is what you’re doing by using funds to pay down your
mortgage.”

Ways
to Beat the 'How to Pay For Graduate School Blues'

FISCALLY FIT

By Terri Cullen

There's nothing like a recession to shove a would-be job
changer off the fence. More than 1.5 million jobs have been
lost since the beginning of last year, and the sluggishness
of the economy has some people thinking about going back to
school to find a new career. According to the Chronicle of
Higher Education, applications to law and other graduate schools
is up 18% from last year's large crop of applicants.

...Education is a long-term investment in yourself, so it
might seem like a no-brainer to tap your 401(k) to pay for
it -- whether you stay with your current employer or not.
But borrowing from your retirement savings should be tapped
only when all other financial options have been exhausted.

"I don't advise borrowing against a 401(k) to pay tuition
costs because you're paying an opportunity cost -- you're
not only cashing out in the midst of a bear market, but you
risk missing out on any recovery," says Dean
Knepper, CERTIFIED FINANCIAL PLANNER professional
and CPA with Lifetime Financial Planning
in Leesburg, Virginia. "It's better to keep that money
earning tax-deferred interest."

Cover
Story - Will You Ever Be Able To Retire?

With STOCKS PLUMMETING and corporations in disarray,
Americans' financial futures are in peril. Here's how to make
the best of it.

Everyone, Back In The Labor
Pool

By Daniel Kadlec

....Ratcheting down risk by adding bonds to a portfolio—and
saving more—is a great start, says Dean Knepper,
a fee only financial planner at Lifetime Financial
Planning in Leesburg, Virginia. "Taking additional
risk in an attempt to catch up," he says, "will
not work if the individual becomes uncomfortable when the
market is down and sells the investment."

Knepperasks his clients to fill out a daily
spending log. "They are often shocked at how that morning
espresso and evening iced latte add up," he says, advising
that if you cut $10 a day from spending, you can accumulate
enough each year to make the maximum $3,500 annual contribution
to an over-50 IRA.

[Reporting by Melissa August]

How
to Play the College Financial Aid Game

By Seth Stern

Many parents who plan to send – or help send –
their children to college are likely to be concerned about
those ever-rising tuition bills that lie ahead. To meet the
expense, mom and dad can put money each year into 529 plans
or other education-related accounts. But there's another side
to the paying-for-college equation: financial aid.

....Parents' assets: While 35 percent of student assets are
counted as part of the family contribution, less than 6 percent
of parental assets are counted in the contribution. In other
words, 35 cents of every dollar in savings a child accumulates
is knocked off the eligibility. So it's better to have assets
in a parent's name than the child's name.

In addition, parents should use their savings to reduce consumer
debts and loans, or shift the money into assets not included
in the aid calculation, says Dean Knepper,
a CERTIFIED FINANCIAL PLANNER professional in Leesburg,
Virginia. Pay off credit-card debts, car loans, and life-insurance
policy loans, since the net-cash value of such policies is
excluded from the aid formula, Mr. Knepper says.

....Another tip: Avoid transferring investments into custodial
accounts for the student. "Investments transferred into
a custodial account are irrevocable gifts and can't legally
be transferred back to the parent," Knepper says. "It
doesn't matter if the money is to be used later for the child's
benefit."

....Relatives other than a parent who want to contribute
to college savings should consider setting up a 529 plan with
themselves as account owner, and naming the student as beneficiary.
That way, Knepper says, the value of the account is not included
as an asset in calculating financial aid.If possible, Knepper
advises deferring taking distributions from any savings plan
until January of the student's junior year of college. That
way, the earnings are not included as income on the financial-aid
form, which is submitted annually.

Loudoun Extra often profiles new businesses or those
in transition. In an occasional feature, we check to see how
those companies have fared and how life has changed for their
owners.

Lifetime Financial

Dean E. Knepper doesn't know why he didn't
do it sooner.

Last year, the Leesburg accountant [CPA and CERTIFIED FINANCIAL
PLANNER professional] opened his own business, Lifetime
Financial Planning LLC, designed to help middle-income
Americans manage money. "I would find it hard to go back
and work for someone else now," he said, citing the freedom
to do things his way.

.... Knepper set out to help people who might have been turned
away from larger investment advisory firms because they lacked
the minimum amount of money to invest.

It's the time of year when millions of Americans hunch miserably
over government forms, painstakingly filling in little boxes
with the details of their family finances. No, we're not talking
about taxes -- it's that unhappy season when parents fill
out financial aid forms for college. Many colleges, especially
private schools, require aid applications to be handed in
by the spring.

If you're in the midst of this joyless process now, good
luck -- it's probably too late to do much to make things easier.
But if, on the other hand, you anticipate applying for aid
in the next year or two, financial planners say there are
a few steps you can take now that could help increase your
family's eligibility for aid.

....Families can also take advantage of extra cash or short-term
investments to pay down debt, advises Dean Knepper,
a CERTIFIED FINANCIAL PLANNER professional and CPA with
Lifetime Financial Planning in Leesburg,
Virginia. "Those assets will count against aid eligibility.
But if [families] use that money and pay off consumer debt,
it increases their eligibility for aid."

DK: Lifetime Financial Planning is an hourly
fee-only financial, tax and investment advisory firm serving
all of Northern Virginia. LFP is unique in that the firm focuses
on meeting the needs of middle-income Americans on an as-needed
basis for an hourly fee.

Our mission is to help our clients solve their financial
problems and reach their most important life goals by providing
sound, straightforward and unbiased fee-only financial planning
and advice.

RW: What's the most interesting part of your business?

DK: Meeting and helping a diverse group of clients from all
over the U.S. and other countries who have relocated to Northern
Virginia

Leesburg financial planner Dean E. Knepper
has only one question, and here it is: "Where did it
all go?"

Knepper says too many clients he has counseled over his long
career have asked that one, and he'd love to know the answer.
Not much keeps him awake at night, but if anything comes close,
it's hearing that question from people who can't afford to
replace the money they've wasted -- let alone figure out where
it went.

That's why Knepper founded Lifetime Financial Planning
LLC. After years spent figuring out how to manage
money for the wealthy, he wanted to focus on helping middle-income
Americans manage theirs. "It's an area that's vastly
underserved," he said.

...."If you're in the middle-asset area, with less than
$250,000 to $500,000 to invest, it's going to be difficult
really to get a lot of attention from a planner," said
Stephan Cassaday, president of the Financial Planning Association
of the National Capital Area. Visiting a fee-for-service company
"is a good alternative for middle-income clients,"
he said.